Uncovering the asymmetric linkage between financial derivatives and firm value - the case of oil and gas exploration and production companies

Phan, Dinh, Nguyen, Hoa and Faff, Robert (2014) Uncovering the asymmetric linkage between financial derivatives and firm value - the case of oil and gas exploration and production companies. Energy Economics, 45 340-352. doi:10.1016/j.eneco.2014.07.018

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Author Phan, Dinh
Nguyen, Hoa
Faff, Robert
Title Uncovering the asymmetric linkage between financial derivatives and firm value - the case of oil and gas exploration and production companies
Journal name Energy Economics   Check publisher's open access policy
ISSN 0140-9883
1873-6181
Publication date 2014-09-01
Year available 2014
Sub-type Article (original research)
DOI 10.1016/j.eneco.2014.07.018
Volume 45
Start page 340
End page 352
Total pages 13
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Collection year 2015
Language eng
Abstract We investigate the role of derivatives in enhancing firm value of US oil and gas exploration and production companies over the period of 1998-2009, using both cross-sectional and time-series tests. Initially focusing on Tobin's Q, we document a 'hedging discount' in periods of increasing oil and gas prices, while there is some evidence that hedging leads to an increase in firm value in periods of decreasing prices. In the companion time-series tests our core finding indicates that hedger portfolios underperform compared to non-hedger portfolios i.e. confirming a hedging discount. We extend these time series tests to provide a range of conditional analyses exploring the circumstances in which this discount manifests. Here we find that the hedging discount is specifically related to periods of elevating oil and gas prices, especially if the price is high.
Keyword Oil and gas
Financial derivatives
Hedging
Firm value
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2015 Collection
UQ Business School Publications
 
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Created: Tue, 07 Oct 2014, 12:18:43 EST by System User on behalf of UQ Business School